Be Careful With Covenants Not to Compete

Almost every contract has an escape hatch — but you might have to escape to a place you don't want to be.

Most physician employment contracts, and many health plan contracts, have provisions known as covenants not to compete, or noncompete clauses, which prevent you from competing with your former employer if you decide to leave and open a practice somewhere else.

Sometimes they go too far. Texas law says noncompete clauses are enforceable if they contain reasonable limits on when, where, and how a physician can establish a new practice. The TMA Board of Councilors says, "Restrictive covenants are unethical if they are excessive in geographic scope or duration in the circumstances presented, or if they fail to make reasonable accommodation of a patient's choice of physician."

Physicians can negotiate the terms of a noncompete clause before they sign a contract, and Texas says that for a covenant not to compete relating to a performance of medical services to be enforceable, it must — among other things — include a buy-out clause.